Fraudsters could use someone's personal data to fill out a financial aid application, and the 'Data Retrieval Tool' would populate the application with tax information

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Updated: 4:19 PM CDT Apr 7, 2017

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WEBVTT JASON: WE CONTINUE OURCONVERSATION NOW WITH MARYLANDCOMPTROLLER PETER FRANCHOT.THANKS FOR COMING BY.TELL ME ABOUT THE TAXPAYERPROTECTION ACT.DESCRIBE IT AS A WHOLE.PETER: I MENTION THE TENS OFTHOUSANDS OF FRAUDULENT RETURNS,HUNDREDS OF MILLIONS OF DOLLARSOF FRAUDULENT REQUESTS WE CUTOFF THROUGH TECHNOLOGY,DETECTION.WE ARE PROTECTING THE CITIZENSTHERE, BUT WE ARE NOT BRINGTHESE CRIMINALS TO JUSTICE.MY AGENCY HAS ASKED THELEGISLATURE TO GIVE US MOREINVESTIGATORY POWER, SUBPOENAPOWER, OR ABILITY TO PARENTTHESE FOLKS OUT AND PREPARE THECASE FOR THE PROSECUTORS, EITHERTHE ATTORNEY GENERAL OR LOCALATTORNEY GENERALS, STATEPROSECUTORS, OR THE U.S.ATTORNEY.THEY ARE THE ONES THAT DECIDEWHO THEY GO AFTER IN COURT.BUT THEY NEED OUR INVESTIGATORS,BECAUSE WE ARE THE EXPERTS ININCOME TAX FRAUD, TO PREPARE THECASE FOR THEM.THAT IS WHAT WE HAVE ASKED THELEGISLATURE FOR.DID NOT PASS LAST YEAR.WE ARE COMING DOWN TO THE WIRE.WE ARE HOPING THAT BY THE TIMETOMORROW NIGHT COMES AROUND THISWILL BE LAW.JASON: IF SOMEONE IS FOUND TO BEFRAUDULENT, IS THERE A CHANCEYOU COULD PULL THEM OUT TODAYAND THEN NEXT YEAR THEY ARERIGHT BACK DOING IT AGAIN?PETER: WE IDENTIFY THEM BUT WEHAVE TO VOLUNTARILY ASK OR THEDOCUMENTS THAT PROVE THEY AREINVOLVED IN FRAUD.JASON: SOMETHING TELLS ME THEYARE NOT GIVING THEM TO YOU.PETER: THEY ARE CROOKS BUT THEYARE NOT STUPID.FRANKLY, WE LOOK LIKE FOOLS WHENWE GO THERE AND ASK TOVOLUNTARILY GIVE US THE DATATHAT YOU HAVE USED TO PREPARETHE RETURNS BECAUSE YOU WANT TOPOSSIBLY INVITE YOU.THEY LOOK AT US LIKE WE ARECRAZY.WE ARE ASKING THE LEGISLATURE TOASK OUR POLICE FORCE THE SAMEINVESTIGATORY, SUBPOENA POWERSTHAT THEY CURRENTLY HAVE FORALCOHOL, TOBACCO, AND PETROLEUMPRODUCTS WHERE WE HAVE THESTATUTORY JURISDICTION.IT IS A GLITCH.NOBODY HAS OPPOSE THE BILL, THEPRIVATE SECTOR IS IN FAVOR OFIT, THE GOVERNOR, MYSELF.NOT A SINGLE PERSON TEST DEFINEDAGAINST IT.IT PASSED UNANIMOUSLY THE HOUSELAST YEAR, SENATE THIS YEAR.BUT IT IS ONE OF THOSE MYSTERYISSUES DOWN THERE IN ANNAPOLIS.WELL, WE ARE HOPEFUL THELEGISLATURE CAN DO THE RIGHTTHING.JASON: JUST HOW BIG IN MARYLANDIS A PROBLEM IS THIS?PETER:? TAX FRAUD?LET'S PUT IT THIS WAY, THEATTORNEY GENERAL HAD HISIDENTITY STOLEN AND SOMEBODYFILED A TAX RETURN IN HIS NAMEAND HIS WIFE'S NAME.THIS IS NOT ONLY SOMETHING THATHAS ECONOMICALLY CHALLENGEDFOLKS, BUT THIS AFFECTS THEPOWERFUL AND THE RICH.10,000 VICTIMS AS WE SPEAK.IT IS LIKE QUICKSAND.ONCE THEY TAKE YOUR SOCIALSECURITY NUMBER AND OPEN THE KEYTO YOUR TAX RETURNS, IT TAKESYEARS TO GET OUT.THIS IS A MAJOR PROBLEM AND WEARE TRYING TO DEAL WITH IT.JASON: IF YOU HAD TO GIVE ADVICETO A TAX FILER RIGHT NOW TO KEEPYOUR IDENTITY SAFE, WHAT ARESOME TIPS?PETER: YOU HAVE THOSE WONDERFULKIDS IN ELEMENTARY SCHOOL.TAKE YOUR SOCIAL SECURITY NUMBERAND HOLD IT, JUST LIKE YOU DOTHEM.UNLESS SOMEBODY ACTUALLY NEEDSIT TO DO SOMETHING FOR YOU.THE CASUAL PUTTING OUT IN PUBLICYOUR SOCIAL SECURITY NUMBER ISTHE MAIN PROBLEM THAT WE FINDWITH IDENTITY THEFT.THEY THEN USE THAT TO GET INTOEVERYTHING.AS I SAID, THE ATTORNEY GENERALOF THE STATE, IF HE CAN HAVE HIS

Hackers steal $30 million by filing fake tax returns

Fraudsters could use someone's personal data to fill out a financial aid application, and the 'Data Retrieval Tool' would populate the application with tax information

Hackers accessed the data of up to 100,000 people through a tool that helps students get financial aid.

IRS Commissioner John Koskinen testified before the Senate Finance Committee Thursday that a breach had been discovered in the fall. In September, he said, his agency discovered that fraudsters could use someone's personal data to fill out a financial aid application, and the "Data Retrieval Tool" would populate the application with tax information.

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That information could be used to file false tax returns. The commissioner said fewer than 8,000 of these returns were processed, and refunds were issued totaling $30 million.

The tool is part of the Free Application for Federal Student Aid (FAFSA) system, which is used to determine how much financial aid students receive for college.

In October, the IRS told the Department of Education that the system could be abused by criminals, but because up to 15 million people use the system for convenience, they kept it available. However, in February, the agency witnessed a pattern of fraudulent activity, and it shut down the automated tool in March.

The IRS flagged 100,000 accounts of people who started the application, used the Data Retrieval Tool, but then didn't finish it. The IRS is alerting those people, as they may have had their information compromised, but Koskinen said some of those applications are likely authentic.

Tax season is a boon for hackers who want to take advantage of taxpayers' data. Sometimes people impersonate the IRS to try and get information out of targets, either through phone scams or email tricks called phishing.

According to the IRS, the 2016 tax season saw a 400% increase in phishing and malware. Earlier this year, the agency reported that cybercriminals were trying to steal W-2 information in what Koskinen called "one of the most dangerous email phishing scams," the agency had recently seen.

The FAFSA tool remains offline, and Koskinen told lawmakers the IRS is developing software to mask the personal tax data to prevent further theft, but it won't be implemented until October. Students and parents can still use an online application system, but must manually enter their tax information.